Kang is an internist and geriatrician by training whose career began as the executive director of the Urban Medical Group, a private not-for-profit group practice specializing in the care of the frail elderly and disabled. From 1994 to 2002 he worked for the federal government, first as a White House Fellow and then as the chief medical officer for the Centers for Medicare & Medicaid Services. In addition to his duties at Cigna, Kang is president of the eHealth initiative, based in Washington, D.C.

We caught up with Kang at the World Health Care Congress in Washington, D.C., last month.

MANAGED CARE: On the heels of the passage of the Patient Protection and Affordable Care Act — PPACA — what’s in store for health plans now?

KANG: First, I’m glad we got through health care reform. I’m glad that 32 million more people will eventually be covered, because access is important. Now, from a health plan perspective, we have to focus on health and wellness, care coordination to improve quality, and lowering cost. The reality is that reform did not focus on those issues so it will be up to the private carriers to focus on them.

MC: How have Cigna’s internal wellness programs improved the company? How have these programs shaped your product offerings?

KANG: Eighty-five percent of our business is administrative services only, so the employer holds the risk. In that context, there are very few levers that we can pull to improve quality and lower costs. In other words, we can’t do medical underwriting — that occurs in the individual market. There are no pre-existing conditions in the employer market, so we can’t do medical underwriting. We can’t do prior authorization. When you think about it, if you deny the coverage, that savings goes to the employer. So really, if 85 percent of our business is administrative services, then we need to add fundamental value for the employers. And what is the value they’re looking for? I’m looking out for the health and well-being of my workforce and increased productivity. Employers expect us to do what is right from a medical necessity or evidence-based standpoint. But there is no financial incentive for us to inappropriately deny care.

MC: Could you expand on that?

KANG: Let’s say in the old days, 20 years ago, in a fully-insured context, let’s say an employee needed back surgery, and the medical evidence says he should get it. I, the insurer, still have an incentive to deny it because of the underwriting costs. Because I’ve got his premium, if I deny the claim, that savings comes to me. But from the administrative-services-only standpoint, if I deny the claim, the savings goes to the employer. Yet, when you look at our contracts, our employers ask us to do what is right, based on evidence. They don’t have incentives for us to deny. They don’t say, If you have five more denials, we’ll pay you extra. We don’t get any more or any less money if everything gets approved or if nothing gets approved. They’re just providing us a fee. In fact, if employers are going to audit us, they audit us on our coverage policy and on the soundness of that evidence. Am I applying that evidence appropriately? That’s the standard.

MC: Over the years, Cigna’s insured base has declined and the administrative services have skyrocketed. So what has been the effect on individual health?

KANG: We declared that our mission was to improve the wellness and health of the population we serve. If you start with that as your mission, where do you go? We have an arrangement with the University of Michigan where we are using health risk appraisals. The HRAs are self-administered. That’s important, because we need to identify the risk before it becomes a claim. An HRA detects whether someone is a smoker way ahead of when he files a claim.

MC: The study published in the September/October Health Affairs said that Cigna members who completed an HRA had an increase in office visits, prescription drugs, and cervical cancer screenings, compared to those not offered an HRA. Does that imply increased costs?

KANG: Yes, on the front end, but lowered costs from acute illness. You mentioned cervical cancer screenings. What’s the right utilization rate for cervical screenings? It’s 100 percent. You want 100 percent of women to get screened for cervical cancer. So when you think about prevention screening, you want higher utilization. That’s the purpose of the HRA — to get 100 percent utilization of prevention and screening tests. I’ll give you another example: The big deal in the legislation is that now health plans have to have 100 percent first-dollar coverage for prevention. That’s a requirement now. From our perspective, that’s easy. We already have that in our guaranteed-cost book so that applies when we’re at risk. In all our consumer-directed high-deductible plans, it’s still 100 percent first-dollar coverage. We won’t sell a plan without that because it doesn’t make sense for prevention services not to have 100 percent utilization. If you look at our entire book, across the 12 million, about 75 percent of our members have a 100 percent first-dollar coverage of prevention. For the other 25 percent, in the administrative services division, the employer elects the benefits. We counsel employers, we tell them you need to have this.

MC: Is there much resistance from employers?

KANG: No, for the most part. When we started this policy five years ago, it might have been around 30 percent of employers were doing this. Now it’s up to 75 percent. It just takes time.

MC: Does the resistance increase as the size of the employer decreases?

KANG: There is a relationship there. But the resistance centers more on how long an employer’s workforce is going to be around. A primary prevention screening tends to pay off three, four, or five years down the road. And if my workforce is turning over every year, as an employer, I may be less interested in doing this. So the turnover rate of my workforce is a big factor. In general, smaller employers tend to have a higher turnover, but the key question is the turnover rate and not so much employer size.

MC: For a long time, employers did not believe health plans could do a lot to improve worker productivity. Has that attitude changed?

KANG: Enlightened employers believe it, but we have yet to have the proof to demonstrate it. But two points: That same HRA that we discussed incorporated six questions from the HPQ, the Health and Performance Questionnaire from Harvard University. It’s our hope and belief that we’ll be able to show health risks coming down but productivity going up. As a concrete example, we published a study in the American Journal of Public Health two years ago where we showed that the use of HRAs to trigger online health coaching increased productivity for the employer — in this case, Unilever in England.

MC: Does prevention reduce costs?

KANG: There is no question about it. I’m certain that the data exists. If you look at the reform legislation, it references the U.S. Preventive Services Task Force. What the legislation wants in the mandatory prevention benefit package are those services that are blessed by USPSTF that have grade A or grade B findings. The USPSTF criteria are whether it is safe, whether it is effective, and whether it is cost-effective. So the task force builds in cost-effectiveness up front in terms of what preventive benefits they’re recommending.

MC: Is an educated consumer, specifically a consumer who is educated about the cost of care, really more capable of making rational health care decisions?

KANG: The short answer is yes. In our consumer-directed plans, we’ve demonstrated year over year persistent savings. We see increased utilization of prevention services because we offer first-dollar coverage. We see increased pharmacy compliance and a reduction in gaps of care. It’s clear to us that people are choosing wisely and that they are getting better care at a better net cost. When costs are coming out of the members’ own pocket, rather than forgoing care, they’re using cheaper substitutions — generic drugs over brand name drugs, primary care over emergency room. We showed all 12 million of our members the costs of an MRI scan, a CT scan, or PET scan. And you can find MRI scans one block from each other — one is $500, the other is $1,500, for the exact same scan. That’s a $1,000 savings.

MC: But how does a consumer make that decision?

KANG: We have all sorts of materials on the cost and quality trade-offs. But for specific MRI vendors, we show the members our contracted rates. That’s the dollar amount that they would pay. Let’s imagine you’re in a coinsurance product at 20 percent. Twenty percent of $1,000 is still $200. People always think consumer-directed care will lead to forgoing care, but they are not forgoing care. What they’re doing is making more cost-effective substitutions for care. People are not going without care.

MC: Let’s say you are a physician in practice. Would you be so certain about this?

KANG: Let’s say you tell your patient that he should get an MRI scan. The patient isn’t saying, I don’t want an MRI scan. The patient is saying, Is there a cheaper place I can get it? That’s two different things. If the physician is recommending it, for the most part, the patient is going along with it. The doctor has all the information about whether you should or should not get it. The only thing that’s on the table is the cost.

MC: But as consumers we tend to think that an $8,000 car is not as good as a $40,000 car. Does Cigna assure us that the quality of the scan at location A is just as good as location B?

KANG: There is no assurance, but we provide education. When you think about health care services, there are some that are commodities. MRI scans are a perfect example. So you go to those two locations — it’s the same machine, the specialist who is reading the result is the same person. The issue now becomes what’s the best rate — there is a fair amount of standardization around these commodity items. The two places that show a difference in quality are physician care and hospital care. Cigna provides quality information and cost information because there is a trade-off there. For example, if you choose a high-performing hospital versus a more standard hospital, you get a 40 percent lower mortality rate and a 40 percent lower morbidity rate. We share that information with consumers. Members can review the ratings on the Cigna Web site. When the consumer conducts a search for a hospital, we rank the hospitals based on highest quality and most cost effective.

MC: Is the consumer informed enough to go to you for the information?

KANG: Clients will say how much we want to fund it versus how much the patient pays for it. In today’s world, let’s say the employer pays 75 percent and the consumer pays 25 percent. When they move to consumer-directed, employer fees should be the same — it should be 75 percent, then the 25 percent out of pocket. The remaining would be put into the health savings account, but the employer still pays for the health savings account. All we’re having the consumer do is the first-dollar coverage rather than the employer, so they begin to understand the cost. This is an important discussion. It should not be about shifting costs. It should be just about getting the employee to understand what the costs are. We walk away if the employer thinks this is about cost shifting.

MC: Thank you.

The reality is that reform did not focus on those issues [wellness and care coordination], so it will be up to the private carriers to focus on them.